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July 26, 2021

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Americans hit the shops as vaccinations kick into gear

Spending at restaurants, shops and entertainment venues has come back in force as vaccinations become more common and it fueled a revenue surge at American Express during the second quarter.

That momentum picked up as the quarter progressed, the company said on Friday, particularly spending from younger customers.

“We saw cardmember spending accelerate from the prior quarter and exceed pre-pandemic levels in June, with the largest portion of this spending growth coming from Millennial, Gen Z, and small business customers,” Chairman and CEO Stephen Squeri said in a prepared statement.

Revenue, net of interest expense, jumped to US$10.24 billion from US$7.68 billion last year, stronger than the US$9.47 billion that Wall Street was looking for, according to a survey by Zacks Investment Research.

Shares of American Express Co. climbed 3.4 percent at the opening bell.

Demand for fee-based Platinum cards is getting stronger, Squeri said, and American Express registered 2.4 million new cards in the quarter.

The New York company earned US$2.28 billion, or US$2.80 per share, for the three months ended June 30. A year earlier it earned US$257 million, or US$0.29 per share. The current quarter included US$866 million in credit reserve releases.

This easily beat projections of US$1.64 from industry analysts.

Pandemic impact

American Express’ consolidated provisions for credit losses resulted in a benefit of US$606 million for the current quarter. This was mostly because of the reserve releases and lower net write-offs. The year-ago period had a provision expense of US$1.6 billion, which was primarily due to significant credit reserve builds the company implemented as it contended with the repercussions of the pandemic.

American Express took a hit in the pandemic, with fewer Americans traveling, dining out or shopping. Spending on corporate and individual charge and credit cards dropped, and those who kept a revolving balance paid off their debts.

That spending freeze thawed as infections plunged during the vaccine rollout.

Infections have begun to spike in some regions of the country where vaccination rates are low. COVID-19 cases nearly tripled in the US over two weeks amid an onslaught of vaccine misinformation that is straining hospitals.

Infections in some area do not appear to be of great concern with the rate of vaccination high and rising.

“We are increasingly optimistic that the momentum we’ve generated will continue given the strength we see in our core business, particularly in the US,” Squeri said.


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